Convertibles better bid; Cobalt, Newmont edge higher on hedge; Auxilium paper 'up small'

By Rebecca Melvin

New York, Jan. 6 - Trading action in the U.S. convertibles market picked up velocity on Monday after a slow start, with a solid bid in the market resulting in a 0.125 point to 025 point improvement on a hedged basis across the board, according to a New York-based trader.

Outright investors, who appeared to be back in full swing and ready to put money to work, supported the market, the trader said.

Cobalt International Energy Inc.'s convertibles slipped a little on an outright basis but added on a dollar-neutral, or hedged, basis as the underlying shares of the Houston-based oil and gas exploration company slipped amid general weakness in the equities markets.

Newmont Mining Corp.'s 1.625% convertibles were also better by about 0.125 point to 0.25 point on a hedged basis with the underlying shares of the Denver-based mining company up 0.7%.

Newmont's 1.625% convertibles due 2017 ended the session with a print at 104 with the underlying shares ending at $24.08.

Auxilium Pharmaceuticals Inc.'s 1.5% convertible due 2018 was also a name on the Trace tape, printing at 110.4 early in the session with the underlying shares of the Malvern, Pa.-based specialty pharmaceutical company at $20.18.

They were "up small," a Connecticut-based trader said, quoting the paper at 110 bid, 110.5 offered, with the underlying shares at $20.15.

Nvidia Corp.'s newish 1% convertibles saw a block trade that was essentially unchanged at 101.875 bid, 102.125 offered, the Connecticut-based trader said. Shares of the Santa Clara, Calif.-based graphics processor company added 21 cents, or 1.3%, to $15.88.

SolarCity Corp.'s 2.75% convertibles due 2018 traded at 129.7 with the underlying shares of the San Mateo, Calif.-based distributed energy provider at about $64.00, which was a gap up following news that Goldman Sachs added the company's shares to its conviction buy list.

On Dec. 10, the SolarCity convertibles were seen at 113 bid, 114 offered with the underlying shares at $51.50.

Meanwhile, Allegheny Technologies Inc.'s 4.25% convertibles traded down about 2 points on an outright basis to 102.5 with the underlying shares of the Pittsburgh-based specialty metals company down about 1% at $35.05. The issue is somewhat weaker than it was toward the end of last year versus the underlying stock.

Trading action in the convertibles market started slowly and picked up speed, a trader said. There were no dramatic moves but a general uptrend in the convertible market amid what amounted to range bound broader markets.

Gold prices sold off and then rallied. The S&P 500 stock market also sold off and then rallied. Treasuries traded up on weaker data, a trader said.

"There was nothing out of the ordinary from what has been the 'defined' range," the trader said.

Equities were weak after data showing the pace of growth in the U.S. services sector slowed in December for a second straight month while new orders for factory goods rebounded in November.

The S&P 500 stock index ended down 4.60 points, or 0.3%, at 1,826.77; the Dow Jones industrial average fell 44.89 points, or 0.3%, to 16,425.10; and the Nasdaq stock market lost 18.23 points, or 0.4%, to 4,113.68.

Fund flows into the convertible market were up in 2013, a trend that was in the offing since about mid-year, according to EPFR Global. The provider of data on fund flows and asset allocation said in its year-end report that funds have been committing fresh money to Europe, floating-rate, convertible and short-term bond funds and balanced. Fund flows into convertibles had been negative for 2012.

Cobalt around 88

Cobalt's 2.625% convertibles due 2019 traded down a point to 88 in active trade Monday from about 89 previously. Cobalt shares ended at $16.15, which was down 8 cents, or 0.5%, on the day.

The Cobalt convertibles trade on both an outright and hedged basis, and there were trades of both varieties on Monday, a trader said.

The bonds had traded up last week and seemed to follow the general trend on Monday, which was for better bids and better pricing.

"The Cobalts were a little better today by about 0.125 point to 0.25 point," the trader said.

The Cobalts had fallen sharply at the end of November on disappointing well update news.

"That's what we saw: no dramatic moves but things were better across the board," the trader said.

Mentioned in this article:

Allegheny Technologies Inc. NYSE: ATI

Auxilium Pharmaceuticals Inc. Nasdaq: AUXL

Cobalt International Energy Inc. NYSE: CIE

Newmont Mining Corp. NYSE: NEM

Nvidia Corp. Nasdaq: NVDA

SolarCity Corp. Nasdaq: SCTY

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.